Southwest U's campus book store sells course packs for $14 each.The variable cost per pack is $12,and at current annual sales of 49,000 packs,the store earns $75,000 before taxes on course packs.How much are the fixed costs of producing the course packs?
A) $25,300
B) $18,860
C) $27,140
D) $23,000
E) $27,600

Question

Quizplus · Accepted Answer

The fixed costs can be calculated by subtracting the total variable costs and the profit from the total revenue. Total revenue is $14 * 49,000 = $686,000. Total variable costs are $12 * 49,000 = $588,000. Profit is $75,000. Therefore, fixed costs = $686,000 - $588,000 - $75,000 = $23,000.

Southwest U's Campus Book Store Sells Course Packs for $14